Eight committee members called for a hike of 50 bps to 18%, while two members were for an increase of 100 bps to 18.5%.

The move followed the central bank's July decision to increase its key policy rate by 0.5pp to 17.5%. In May, the NBU retained its key policy rate unchanged at 17% due to the fact that the current monetary conditions are sufficiently tight to bring inflation to its medium-term target.

The NBU's committee mentioned the capital flight from emerging markets as a factor to watch. Devaluation of national currencies among Ukraine’s trading partners might result in lower competitiveness of Ukraine’s goods on external markets. In addition, the overall lower interest of international investors to emerging markets might impede the access of Ukrainian borrowers to the global capital markets.

When discussing the recently increasing devaluation pressure on the Ukrainian national currency, the committee members agreed that the direct impact on inflation will not be substantial given the fact that YTD hryvnia devaluation was much lower than the devaluation of trading partners’ currencies.

At the same time, the central bank admits that hryvnia devaluation pushed inflationary expectations higher. To reduce the volatility of the exchange rate, the NBU will make interventions on the FX market, but it will abstain from the attempts to counteract the major trends.

Evgeniya Akhtyrko at Kyiv-based brokerage Concorde Capital underlined in a note on September 20 that the minutes reveal that the committee members didn’t discuss the risks regarding the expected disbursement of the International Monetary Fund (IMF) loan tranche to Ukraine.

"This implies that during the September 5 meeting, top NBU officials had positive expectations regarding the outcome of the IMF mission visit to Kyiv," she wrote. "The next revision of the key policy rate is scheduled for October 25. In our opinion, a further rate hike is possible only if the situation on external markets deteriorates."

On September 18, CEO of the nation's gas monopoly Naftogaz Andriy Kobolev said that the Ukrainian government has secured "an agreement in principal" with the IMF over the gradual increase of the price of gas to the level of the imported price parity by 2020. "There is a preliminary compromise that the government has reached [with the IMF]," Interfax quoted Kobolev as saying. "The pace is now being discussed."

The increase of the gas price for households is a crucial condition for the latest $2bn tranche due from the IMF and part of its $17.5bn package agreed with Kyiv in 2015 alongside the adoption of the anti-corruption court legislation, and the implementation of measures to ensure that the 2018 budget deficit will not exceed the planned level.

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